Fizzy drinks with class offer lift to carbonates
What is to be done to stop the declining sales of carbonated soft drinks? The problem is well-documented: regular carbonates are perceived as over-sugared, seen as unhealthy and viewed as being responsible for rising obesity, especially in the young.
In the US, where carbonates are more commonly known as sodas, sales across retail, vending and fountain channels fell last year for the first time since 1985, according to Beverage Digest. And even sales of diet variants, which had been lifting the category, are now stagnating. Diet Coke volumes were essentially flat in 2005, whilst Diet Pepsi volumes dropped 1.9%, compared to a nearly 7% increase in 2004 (Beverage Digest).
However, a new niche category has emerged on the sparkling front that could prove to be the carbonates' saviour - the gourmet soda.
These drinks are presented as healthy because all natural ingredients are used. No high fructose corn syrups go into a gourmet soda (a particular concern in the US); instead the sweetness comes from natural juices and cane sugar. The very word 'gourmet' conjures up an image of exclusivity and the drinks are priced accordingly, almost double compared to a regular Coke.
The Izze Beverage Company of Boulder, Colorado, which began trading in 2002, is a prime example of a successful gourmet soda producer. Todd Woloson, founder and president, reports triple-digit growth since inception. "It's the refreshment of carbonation without the baggage," he recently told the Wall Street Journal.
The product range comprises an all-natural blend of pure fruit juice and sparkling water, free of caffeine, artificial ingredients, high-fructose corn syrup and all other refined sugars.
With the recent appointment of SoBe founder John Bello as chairman, Izze seems set on an upward path of growth. "With its natural positioning as a health product, Izze has the brand charisma and consumer passion that can help it rise above the clutter in a competitive and crowded beverage space," said Bello.
Charisma is an appropriate word for these upmarket fizzy drinks. Steaz of Newtown, Pennsylvania, markets its gourmet range as "sodas with soul". The company has recently launched an organic green tea soda, the first carbonated green tea, in two flavours, Grape and Ginger Ale. The ingredients are 100% certified organic. There are no artificial flavours, colours or preservatives. "We know that when it comes to soft drinks people are passionate about their favourite flavours," said Eric Schnell, co-founder of Steaz Organic Green Tea Soda. "Our company was founded on the premise of providing a healthy, new spin on the classics."
"For gourmet read 'grown up'" is the ethos behind GuS which stands for Grown up Soda. This New York City-based company was launched in 2003 by husband and wife team Steve Hersh and Jeanette Luch. They left their respective jobs to develop a line of 100% natural sodas made from real juice and all-natural ingredients in distinctively dry flavours such as Lemon, Star Ruby Grapefruit, Valencia Orange, Cranberry Lime and Crimson Grape.
From a small niche New York City enterprise, the company has continued to expand in typical American 'go west' fashion. This spring it has signed with new distributors to market the range across the Mid West, West Coast and South Western States.
Another successful young start-up New York City company is Fizzy Lizzy, formed by Lizzy Marlin in 2003. Marlin says: "I started Fizzy Lizzy because I used to always mix fruit juice and seltzer at home but could never find such a delicious and thirst-quenching concoction in stores. I know how many other people crave a healthful alternative to soda and a drink that's not overly sweet." Each bottle of Fizzy Lizzy contains an average of 70% juice; the latest flavours to join the range are Passionfruit and Raspberry Lemon.
What links these young gourmet soda producers are their passion and commitment. Niche they may be - as Woloson puts it, "Izze sales of US$20m a year compared to Coke and Pepsi aren't even a rounding error for a division of a division" - but the margins are nevertheless enviable.
Financial analysts believe such success makes them attractive takeover targets for the major soft drink companies as it is less expensive to buy than to develop new products and new brands. PepsiCo did this when it acquired SoBe in 2001.
Falling carbonated soft drinks sales might be part of a long-term trend, but according to the Hartman Group, based in Washington State, there is no need to panic. Its research shows that consumers are not going to abandon the category or that consumption will go into freefall.
Hartman does make the point, however, that "masquerading your traditional carbonated soft drink offerings as something other than soft drinks will only make your brand appear out of touch and risk alienating your consumer. Consumers are increasingly demanding more innovative beverages that provide a 'better fit' for their contemporary lifestyles".
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